(Responsibility reports) To respond to increased competition and a reduction in profitability, the nationwide law firm of O’Brien New & Cave recently instituted a responsibility accounting system. One of the several responsibility centers established was the Civil Litigation Division. This division is treated as a cost center for control purposes. In the first year XXXXXXXXXXafter the new system was established, the responsibility report for the Civil Litigation Division contained the following comparisons: Budget Actual Variance Variable costs Professional labor $3,000,000 $ 2,820,000 $180,000 F Travel 150,000 120,000 30,000 F Supplies 300,000 270,000 30,000 F Fixed costs Professional labor 1,200,000 1,215,000 15,000 U Facilities 750,000 795,000 45,000 U Insurance 240,000 234,000 6,000 F Total $5,640,000 $5,454,000 $186,000 F For 2010, the division projected it would handle 3,000 cases, but its actual case load was 2,970. a. What are the major weaknesses in the preceding responsibility report? b. Recast the responsibility report in a more meaningful format for cost control evaluation. c. If O’Brien New & Cave uses a management-by-exception philosophy, which costs are likely to receive additional investigation? Explain.

(Responsibility reports) To respond to increased competition and a reduction in profitability, the nationwide law firm of O’Brien New & Cave recently instituted a responsibility accounting system. One...

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(Responsibility reports) To respond to increased competition and a reduction in profitability, the nationwide law firm of O’Brien New & Cave recently instituted a responsibility accounting system. One of the several responsibility centers established was the Civil Litigation Division. This division is treated as a cost center for control purposes. In the first year XXXXXXXXXXafter the new system was established, the responsibility report for the Civil Litigation Division contained the following comparisons:

	Budget	Actual	Variance
Variable costs
Professional labor	$3,000,000	$ 2,820,000	$180,000 F
Travel	150,000	120,000	30,000 F
Supplies	300,000	270,000	30,000 F
Fixed costs
Professional labor	1,200,000	1,215,000	15,000 U
Facilities	750,000	795,000	45,000 U
Insurance	240,000	234,000	6,000 F
Total	$5,640,000	$5,454,000	$186,000 F

For 2010, the division projected it would handle 3,000 cases, but its actual case load was 2,970.

a. What are the major weaknesses in the preceding responsibility report?

b. Recast the responsibility report in a more meaningful format for cost control evaluation.

c. If O’Brien New & Cave uses a management-by-exception philosophy, which costs are likely to receive additional investigation? Explain.

Answered Same Day Dec 24, 2021

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David answered on Dec 24 2021

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(Responsibility reports) To respond to increased competition and a reduction in profitability, the nationwide law firm of O’Brien New & Cave recently instituted a responsibility accounting system. One...

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